Fuel Prices Rise, Gazprom’s Social Projects – Belarus State TV Digest

Fuel became more expensive in Belarus, but is still cheaper than in neighbouring countries. Channel BT1 extensively covered a meeting of Lukashenka with the head of Russia's largest bank Sberbank and the head of Gazprom and Gazprom's support for social...

Fuel became more expensive in Belarus, but is still cheaper than in neighbouring countries. Channel BT1 extensively covered a meeting of Lukashenka with the head of Russia’s largest bank Sberbank and the head of Gazprom and Gazprom’s support for social projects in Belarus.

State TV also reported that the European Union expressed its interest in rapprochement with the countries of the Eastern Partnership. Recently thousands of Belarusian pupils have shown interest in learning Belarusian language rather than Russian.

Domestic Affairs

The voice of Belarus on Syria. State TV reported on a round table of Belarusian experts, a Syrian diplomat, a Syrian businessman and unnamed international experts that took place in Minsk. The participants thanked Lukashenka for his “attention and contribution to a global settlement of the crisis”. A Syrian businessman based in Belarus commented on the Russian proposal to the crisis, saying “we can barely trust the American politicians”. The Belarusian TV channel noted that in the aftermath of the “confrontation between the authorities and armed insurgents, every third citizen of Syria has lost his house”, which amounts to about 7 million people in total.

Gazprom sells energy to Belarus and supports its financially. The state channel widely covered the meeting of the head of Gazprom, Alexei Miller, with Lukashenka. Journalists commented that regardless of the bad press it has received, this week proved that the Russian business still had a vital interest in Belarus. Lukashenka also met with the head of the Sberbank of Russia, Herman Gref. The head of the state confirmed that gas supplies would increase in the next year and discussed with Miller the future development of the gas transportation system.

At the meeting “special attention was paid to the social projects of Gazprom in Belarus”. Lukashenka thanked Miller for years of support and strong co-operation. In Miller’s words, financial support to social projects in Belarus would increase by 5 times as much”. These social projects relate to sport and cultural events for children, but also support for hospitals. The state TV journalists recalled that the Russian company Gazprom planned to donate 1m USD to purchase expensive modern equipment for Belarusian hospitals. This equipment would help with an early diagnosis of hearing loss in babies.

Gazprom was aslo involved in the raising of a new Orthodox Church in the town of Polack. It also supported financially the construction of a house for families with multiple children. It continues to support children’s cultural and sport events. According to the journalist, the Belarus-Gazprom is a “good partnership in both the social and economic spheres”.

A new energy supplier to Belarus?The head of the Rosnieft met with the head of Belarusian company Belnieft, Igor Zhylin. They discussed the supply of Rosnieft gas to the “Hrodna Azot”, but also potential supplies to Belarus by the end of 2013 and in 2014.

The state supports talented youth. Lukashenka visited the Minsk City Olympic Tennis Centre. The state television reported that the number of Belarusian interested in playing tennis is increasing. The journalist emphasised that Lukashenka had ordered the establishment of a proper system for the selection and training of young talented athletes.

Lukashenka wants more Belarusians to be trained and then successfully represent Belarus in international sport events. He stated that the proper conditions should be created for both athletes and trainers. He said, “I cannot understand how we could not train around 50 players”.

Green economy in Belarus and Kazakhstan. A forum of Belarusian and Kazakh scholars, diplomats and experts took place in Minsk. The participants of the event discussed alternative energy, bio-resources and the development of more efficient technology. According to experts, transition to a new ecological model would allow not only to increase the GDP of the state, but also to create new workplaces and a completely new branch of production.

Lukashenka is concerned about the construction of new houses in Minsk. The head of the state met with the Minsk mayor, Mikalai Ladutka, to discuss the construction of new houses in Minsk. Lukashenka expressed his concern over the long term of construction of the houses. The mayor confirmed that in the next year nearly 1 million new houses would show up in Minsk.

More expensive fuel, but in other countries it is worse. Prices for fuel increased in Belarus. According to experts, “this increase is related to an increased excise rate of the petrol”. At the same time, experts stated that after the increase, prices in Belarus still would be lower than in other countries of the Customs Union. In Ukraine a litre of fuel costs $1.34. In Poland and Lithuania pay over $1.80. The fuel in Belarus costs slightly over $1 per litre.

The European Union rapprochement? Belarusian state television reported that the plenary session of the European Parliament encouraged the countries of the Eastern Partnership for rapprochement. It said the EU would “be searching for a way for a normative rapprochement also with the members of the Customs Union”.

Stephen Fule, a commissioner responsible for the enlargement of the union and European neighbourhood, said that “EU is interested in traditionally strong relations with its Eastern neighbours and with Moscow”. The state TV added that Brussels would help the Customs Union to adjust the standards and norms to meet European and worldwide law regulations”.

EU supports Belarusian border service. State television informed that the EU supported Belarus with new equipment to operate its border service on the Belarus-Ukraine border. The journalists pointed out that the EU helped within a project of international technological assistance. It added that a vector for Belarus-Ukraine interests the Europeans for a good reason.

The border is difficult to control and became recently popular way for illegal migrants and “uninvited guests” on their way to the EU. The border service guards say that the new equipment is not just a luxury, but a necessity to decrease border crimes. In total, the EU budget for the international technological assistance for Belarus-Ukraine is estimated to be around 1.3m EUR.

Education in Belarusian is getting more popular. State TV reported that a thousand pupils have begun their education in the Belarusian language. Already 14 schools in Minsk, and in 200 other places across the country, are offering education exclusively in Belarusian. The TV channel added that it was “possible also to study in Belarusian abroad. Today Belarusian schools exist in neighbouring Lithuania, Latvia and Poland”.

Belarus Digest prepared this overview on the basis of materials available on the web site of Belarusian State Television 1 (BT1). Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.

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19 September 2013

IMF Loans: The Money We Do Not Need?

Protesting at the IMF (photo by Dima Shehigelski)

A controversial event took place next to the International Monetary Fund (IMF) office in the middle of the summer in Washington, DC.

Dozens of Belarusians stretched eye-catching posters encouraging the IMF to assist Belarus. The protesters wore the masks of the Belarusian leader Alexander Lukashenka and explained their reasoning, for instance, with phrases like “The dictatorship is very expensive” or “I need money for the KGB!”.

The protest’s appeal was its irony. Despite a very attractive and media-wise approach, however, the purpose of it remained quite ambiguous. The strikers protested against IMF and similar institutions, which, as they claim, support the current regime in Belarus. The question remains, whether the IMF actually strengthens the current administration or is simply helping Belarusians not to die out.

Why the IMF is ready to support empty-handed countries?

International altruism rarely happens. The IMF, as is true with most of international organisations, cannot stay politically neutral, while it pursues the interests of its member states. Otherwise, no other reason exists to create such an organisation.

What do rich countries expect from the IMF? They simply want the entire financial system in the world running smoothly, because once it stumbles in one country, the domino effect might influence others. If something goes wrong in a developing country, it affects its neighbours, its partners and, in the long run, even the most developed and wealthiest countries. None of the countries in the world lives in a complete vacuum. Even North Korea, who is heavily dependent on China with its exports and imports, still has other trading partners.

The IMF usually supports low-income and developing countries to fix the trade balances by covering the gaps between exports and imports. Developing countries become special links in the chain to worry about, particularly if they are more prone to the breakdowns than other countries. For instance, Greece’s default could cause a financial crisis that could spread on the entire Eurozone.

As a developing country, Belarus draws its loans from a special IMF fund called the Poverty Reduction and Growth Trust (PRGT). Its money covers the difference, when a country buys more than it actually sells. The Belarusian government cannot “buy votes” with the IMF, since it can neither cash in on these funds, nor use it to increase the salaries of public sector employees and or boost retirement plans. Belarus, however, has other opportunities to abuse the money it receives from the fund.

How could the IMF money be misused?

Recipient countries can misapply IMF funds by using the borrowed money for even more imports. Instead of improving the situation with trade balances, a country can increase the gap by importing even more with the IMF’s funds and simply postponing payments back. Despite breaking the rules, the recipient country stands to receive significant benefits. IMF loans can create additional positive effects like when financial and monetary reforms take place in the recipient country. Basically, while postponing the debt to be paid later on, Belarus would still have to conduct necessary reforms requested by the IMF.

Inappropriate application of funds also occur when a recipient country reinvests IMF money elsewhere while gaining even more money from outside. The IMF lends with very favourable conditions for the borrower in terms of the interest rate. Let’s say the Belarusian government receives its money from the IMF and uses it to buy the U.S. state bonds, euros, British pounds or Japanese yen. This reinvestment has very low interest rates, but the profit gained still exceeds the interest that a recipient country has to pay back to the IMF. With the current political situation, however, the scenario of American or European governments letting Belarus reinvest seems unlikely.

More realistically, the Belarusian government may exploit the IMF funds by indeed using it to cover any excess imports, but it should be noted that only the political elite makes foreign purchases. This happens when the political elite buys from outside exclusively for its own consumption. In this case, the products bought with the IMF money benefit a very closed group.

Let’s say this happens in our country and, thus, we say a firm “no” to the IMF. Belarus would have to limit its import transactions of larger pro-governmental enterprises. But remember the domino effect? Rejecting the IMF funds will negatively affect everybody in Belarus. Larger organisations taken out of the game will block the imports of all the small and medium enterprises (SME). The SME sector mainly consists of private little businesses not related to the government that behave independently from it as much as they can in a very centralised country.

With all the regime constraints in place, small and medium enterprises face difficulties in launching and keeping their private businesses open in Belarus, though strongest have managed to keep their doors open. Half legally and half illegally, they do exist. The protesters in front of the IMF building do not seem concerned about what is going to happen to these businesses if Belarus will not receive IMF loans. Do the 9.5 million people residing in Belarus deserve the suffering caused by punishing a couple of bad guys in pro-governmental enterprises?

Pursuing similar goals

In truth, the IMF only resembles a charitable organisation. The developed member states stop investing in a country, if, instead of improving the country’s poor state, it keeps on asking for more financial assistance. The rich countries support others to develop trustworthy partners that they can work with. Thus, any loan from IMF comes with the conditions to make the government more transparent and to open up to the global economy.

Recent IMF recommendations include limiting wage increases to target the inflation, maintaining exchange rate flexibility and curbing high foreign exchange lending growth, tighten liquidity, and adopting comprehensive and ambitious structural reforms. In order to free up liquidity, the IMF policy invites such measures as selling off state assets and cuts in vital government spending, which in Belarus’ case might mean the privatisation of state enterprises and cuts in major governmental expenses such as the police force, for instance. In striking against the IMF, Belarusians are at the same time protesting against these improvements in Belarus.

The protesters gathered in front of the IMF building this summer would support these reforms. That is exactly what the IMF wants from Belarus as well. Even if the IMF does not act as if it is Belarus’ best friend, it remains a good partner that is pursuing the same changes consistently in Belarus. Right now, the interests of the IMF and the interests of the majority of Belarusian people coincide.

Before going continuing to protest against the IMF, we should understand what the IMF expects from Belarus. Those Belarusians who advocate for democratisation through reforms should understand that the IMF, led by its main donors, has the same vision for change in Belarus. Belarusians would benefit more if civil society organisations would protest for as the lowest possible interest rates on IMF loans rather than struggling against the receiving the funds in the first place.

Palina Prysmakova

Palina is a PhD Candidate in Public Affairs at Florida International University